The Oklahoma Supreme Court has rejected claims from the Cherokee Nation that its business losses stemming from COVID-19 warrant compensation from the tribe’s property insurance provider.
The Cherokee Nation owns and operates 10 casinos in Oklahoma. The tribe voluntarily closed those businesses in 2020 during the height of the pandemic in part of a statewide effort to slow the spread of the coronavirus.
The tribe argued in a lawsuit brought against its property insurer — Lexington Insurance Company — that Lexington is liable to provide compensation to the tribe for the casino closures that came as a result of the health emergency.
In a split decision, Oklahoma’s highest judicial branch ruled that Lexington did not agree to compensate the tribe in the event of a communicable disease shuttering normal operations.
The Cherokee Nation did not contract for coverage for its alleged losses. Instead, it contracted for business interruption coverage based on a tangible loss or damage to property,” wrote the concurring justices.
Concurring were Chief Justice Richard Darby, Vice-Chief Justice M. John Kane IV, and Justices James Winchester, Dustin Rowe, and Dana Kuehn. Justices Douglas Combs, Noma Gurich, and James Edmondson dissented, while Justice Yvonne Kauger excused herself from the matter.
Appellate Courts Override Lower Ruling
Attorneys for the Cherokee Nation contended that though there was not any physical damage to its casinos and resorts, COVID-19 rendered the properties unusable for their intended purposes. The legal argument was that while the coronavirus didn’t structurally damage the buildings, the contagious virus made the casinos unsuitable for public occupancy.
The Cherokee County District Court sided with the tribe. That prompted Lexington to appeal the case to the state’s high court, which overturned the lower court’s decision.
“We hold that Cherokee Nation’s losses are not covered under the business interruption section of the insurance policy at issue. The district court erred in finding business interruption coverage when Cherokee Nation did not sustain immediate, tangible deprivation, or destruction of property,” the Oklahoma Supreme Court majority determined.
The concurring justices boiled down the matter to defining “loss” and “damage.” They concluded that “damage” is a lesser harm than “loss,” but under the insurance policy, both must be “physical” and represent “tangible” and “material” loss.
“Nation does not present any evidence that its property was tangibly damaged or destroyed but only that it chose to temporarily not use its properties,” the consenting justices ruled. “This Court cannot rewrite the Policy and expand coverage for losses that fall outside the plain and unambiguous terms of the insurance contract.”
Another Win for Insurers
The Cherokee Nation COVID-19 lawsuit loss is yet another victory for the insurance industry.
To date, no commercial or tribal casino has been granted property insurance compensation stemming directly from a COVID-19 closure. Some insurance carriers have since been rewriting their policy language to assure that this will remain the case in the future.
Many large carriers now include language stating directly that communicable diseases are not covered by property insurance. Other carriers, however, say the policies don’t need to be rewritten, as the courts have proven that their pre-pandemic policies already protected the firms against communicable diseases.
“A COVID-19 or pandemic-related exclusion would be like adding suspenders to a belt,” Cincinnati Insurance Companies spokesperson Betsy Ertel told Reuters.
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